tv [untitled] July 12, 2012 11:30am-12:00pm PDT
supervisor chu: welcome to a special meeting of the budget and finance subcommittee. do you have any announcements? >> please silence all cell phones and electronic devices. completed speaker cards and copies of any documents included as part of the file should be submitted to the clerk. items acted upon today will appear on the july 24, 2012 board of supervisors agenda unless otherwise stated. supervisor chu: thank you very much. would you call items one and a wheel? >> item 1, ordinance amending the business and tax regulation code to enact new article 12 a-1 to impose gross receipts tax and gross expense tax on persons
engaging in business activities in san francisco, amending article 12 a to reduce business payroll expense tax rates based on the amount of gross receipts tax collected under article 12- a-1, and in the current business registration fee to generate $13 million in additional revenue. item two, motion ordering submitted to the voters and ordinance amending the business and tax regulations code to impose a gross receipts tax and gross expense tax on persons engaging in expenses activities in san francisco, amending the ordinance to reduce business payroll expense tax rates based on the amount of gross receipts tax collected, amend the article to establish business registration fees based on gross receipts in gross expenses, amid the current business registration fees to generate
$40 million in additional revenue. supervisor chu: thank you very much for reading both items. i know these are brought by a number of sponsors. i just ask whether any members of the committee would like to speak on the items before we begin. i just want to note we have been joined also by the president of the board. supervisor chiu. supervisor chiu: thank you, and i appreciate your consideration of this matter. there are a number of proposals which have been moved forward to contemplate how we reform our current payroll tax to a gross receipts tax as well as increases to our business license fee. i want to thank supervisors avalos for his leadership as well as mayor lee for the proposal he and i have been working on. i want thank our city economist for the tremendous amount of work that they have done over the past six months to move this forward. colleagues, today, there are a
number of technical amendments that i would like to make to the measure that mayor lee and i had, and i believe supervisor avalos will be making the same technical changes to his version. in general, they are language cleanups, technical corrections to definitions of financial services, other clerical corrections. if it makes sense to have controller walk through some of the specifics, i would suggest that, but otherwise, these are mostly technical amendments to be hopefully adopted today. it is my hope we can continue this item -- these items to next week's hearing, at which time we will hopefully have more clarity about whether we can move forward with one measure as opposed to to a video or have a bit more of a robust discussion on these different matters. supervisor chu: thank you. for members of these public -- for members of the public, both these items have been called.
i know a number of amendments will likely be proposed today, which will require we continue these items. rather than go forward with a full presentation today, my intention is that we will be going through the full presentation of the specific proposals in the coming week. supervisor avalos: thank you. just want to thank my co- sponsors for this measure. very similar to the mayor's measure. we are proposing replacing in great part the payroll tax with a gross receipts tax, a new version of our business tax that will not be taxing jobs and job creation in san francisco. this work could not be done without -- this measure could not be done without the great work of the comptroller's office -- the controller's
office that are reaching out to the business community to get input on how to craft a measure that can really achieve its objectives, lifting up our job creation abilities in san francisco and looking at how to create a fair tax structure in the city. i will not go into detail about the measure, but i want to make sure that both the measure i have and my colleagues are supporting are really looking at how to support small businesses in san francisco. we have an exemption of businesses whose revenues below $1 million will be exempt from any of the gross receipts tax provision. that is something i think is significant as we are moving forward as a city. i am looking at how we can have a measure that can generate some revenue to meet the increasing demands on our public infrastructure and that is increasing when our economy is also burgeoning. that is something i think we will have a clear discussion
about in the weeks to come. i am hopeful we can have one measure that can go to the ballot, and, hopefully, it is one that will have broad support between the mayor's office, the mayor, and the board of supervisors, the business community and non-business community and labor groups supporting the measure i am working on as well. that would be great for the passage of the measure as we go forward. i have. i would like to submit a motion to accept these technical amendments, and our controller is here to talk about what we are introducing today. these technical aspects of the new version. i do believe there was discussion about where my measure is silent on the business tax exemptions that
were enacted or have been enacted in the past eight years or so, the mid-market exemptions -- my measure is actually currently silent on this, meaning the it does not actually actively take them away. there is a phase-out of the payroll aspect of our business tax. my measure does not mention taking away the exemptions, but they will be phased out. but i believe there is still discussion about continuing those exemptions in the newest version, and i am open to that as a way to actually come to some consensus on a measure going forward. >> thank you -- supervisor chu: thank you. i would ask the controller's office to speak to the specific amendments. it sounds like they are acceptable for both items one and two, so i would like the
office to walk through those changes for us. >> good morning, supervisors. we have provided a one-page summary to the committee members, which is also available to the public on the podium of the amendments that have been moved to both measures today. generally speaking, we have organized these into three different buckets, so there are general changes throughout. clean up language, correcting typos, clarify definitions versus the amendments introduced a month ago. there are higher registration fees than the initial introduce measures. it would have been paid in fiscal year 2015 -- 2014-2015. although the licensees differ, the schedule of them differs by one year.
the phase i and formula, which is critical to the measure had technical errors in the math. those have been corrected now in both measures. secondly, there are changes to the treatment of administrative offices. again in the measures that are before you, if a company finds itself defined as an administrative office, it ends up paying administrative office tax. we have placed titers greens regarding the definition of what is an administrative office for purposes of that tax. it now not only requires 50% of a company's payroll expense, but it also has u.s. receipts of over $1 billion and over 1000 employees. we further in this section more clearly define examples of what
constitutes an administrative function and what is not an administrative function to provide fleet into greater clarity to taxpayers and make the measure more straightforward to administer for the treasurer's office for purposes of the 50% test. we have excluded stock-based compensation from the payroll based. that is for purposes of determining whether you are an administrative office or not. it does not change the underlying tax, so stock compensation remains part of the base for the tax itself should a company find itself in this group. leslie, general clarifications that the administrative office tax shall be calculated on the same means basically as the current payroll tax. there are other changes throughout to clarify or amend what constitutes a taxable receipts, including some additional exclusions and definitions versus the introduction 30 days ago.
first of all, a clarification that an individual doing business -- or that an individual in the city doing nothing but managing their own money does not become a taxpayer. we heard this as a possibility from many different taxpayers' reading of the legislation. so we clarified. and individuals returns from their own capital are not subject to the tax. next, we have clarified -- and again, i think this is -- was the intent, and clearly was the -- our internal team's intent for the initially drafted legislation, but given some confusion and concern we have heard from taxpayers, we are clarifying that certain activities, the various investment funds in and of